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Talking Tax - Issue 28

In order for a donation or gift to be tax deductible, it must be made to a deductible gift recipient (DGR). To receive DGR status, the recipient entity must be ‘in Australia’. The ATO has recently updated its website to clarify what it means to be ‘in Australia’. The ATO states:

‘…all DGRs must be established and operated in Australia. The purposes and beneficiaries of a DGR do not have to be in Australia, unless the DGR is a public fund that is specifically required by law to have its purposes and beneficiaries in Australia, such as a necessitous circumstances fund.’

If you would like assistance in determining whether your fund has DGR status, please contact one of our experienced tax lawyers.

ATO warns multinationals to get in touch or face tougher penalties

The ATO has warned multinationals that if they meet the definition of a ‘significant global entity’ and are potentially impacted by the Multinational Anti-Avoidance Law (MAAL) – reported on here and here – they need to notify the ATO by 31 March 2016.

If a multinational meets the definition of ‘significant global entity’ and does not engage by the deadline, the increased MAAL penalties of double the shortfall amount may apply.

ATO and Treasury provide evidence to inquiry into external scrutiny of the ATO

This week, ATO and Treasury officials gave evidence to the House of Representatives Standing Committee on Tax and Revenue’s inquiry into the external scrutiny of the ATO. It was expected that, at the hearing, the ATO would outline its proposals for more efficient scrutiny. As it stands, the ATO is currently scrutinised by the Auditor-General, the Inspector-General of Taxation, the Ombudsman, the Office of the Australian Information Commissioner and various parliamentary committees.

Legislation and government policy

Bills to enter Parliament this week

The following Bills have been introduced into Federal Parliament this week:

Tax and Superannuation Laws Amendment (2016 Measures No 2) Bill 2016

This Bill contains, amongst other things, the Commissioner’s new remedial power to create disallowable legislative instruments to remedy unforseen or unintended outcomes in taxation laws.

Tax Laws Amendment (Tax Incentives for Innovation) Bill 2016

This Bill provides investors in early stage innovation companies with a tax offset and a capital gains tax exemption.

It also amends the venture capital limited partnership laws to improve access to venture capital investment by clarifying the framework, and provides tax incentives and relaxed restrictions to early stage venture capital limited partnerships.

Treasury Legislation Amendment (Repeal Day 2015) Bill 2016

This Bill has been introduced to the Senate after amendments in the House of Representatives.

It amends the Corporations Act 2001 to modify the reporting obligations of certain corporations that have property in receivership or property in respect of which a controller is acting.

It enables the Commissioner of Taxation to pay certain lost superannuation directly to individuals with a terminal medical condition.

Foreign CGT withholding regime on its way

The Tax and Superannuation Laws Amendment (2015 Measures No 6) Bill 2015 – reported on here and in Issue 25 of Talking Tax – has now been passed by the Parliament and has received Royal Assent.

It means that from 1 July 2016, a 10% non-final withholding tax will apply to the disposal of relevant taxable Australia property by ‘foreign residents’ in certain circumstances. The purchaser is required to withhold and remit 10% of the total consideration for the sale of the asset to the Commissioner of Taxation. The ‘foreign resident’ vendor must lodge an income tax return to receive the credit they are entitled to.

‘Netflix’ tax passes the House of Reps and moves to the Senate

As previously reported last week, the Tax and Superannuation Laws Amendment (2016 Measures No.1) Bill, otherwise known as the ‘Netflix’ tax, has passed the House of Representatives and has been introduced into the Senate. The Senate Economics Legislation Committee has released its report into the Bill and recommended that it be passed.

The Bill applies GST to digital products and services imported by Australians, which according to the Treasurer Scott Morrison, will ensure ‘Australian businesses selling digital products and services are not disadvantaged relative to overseas businesses that sell equivalent products in Australia’. The Bill purports to do this by applying GST to the supply by non-resident companies of digital products such as a software subscription service, or digital content such as films and apps, and other services, such as professional or consultancy services, to Australian consumers. Previously a supply of goods or services was only subject to GST is its supply was ‘connected with Australia’. This ‘connection with Australia’ test has been expanded.

Additionally, the Bill aims to remove red tape and consequently minimise compliance costs for non-resident suppliers by shifting the GST obligations to Australian-based business recipients.

Changes to valuation requirements in dutiable transactions between related parties in WA

The WA Office of State Revenue (WAOSR) has amended the independent valuation requirements for dutiable transactions between related parties. From 1 March 2016, the independent valuation may not need to have been specifically performed for duties assessment purposes and written authorisation is not required to permit the Commissioner to rely on the valuation in the assessment of duty.

This article was written with the assistance of Saul Wakerman, Graduate Lawyer.

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